Planning for retirement is one of the most critical financial decisions you will make. With so many retirement plans available, choosing the right one can feel overwhelming. In this guide, I break down 101 retirement plans, their benefits, drawbacks, and key considerations to help you make an informed decision.
Understanding Retirement Plans
Retirement plans come in various forms—employer-sponsored, individual, government-backed, and hybrid options. Each has unique tax advantages, contribution limits, and withdrawal rules. Let’s explore them in detail.
1. 401(k) Plans
A 401(k) is an employer-sponsored retirement plan where employees contribute a portion of their salary pre-tax. Many employers match contributions, making it a powerful savings tool.
Example Calculation:
If you earn $60,000 annually and contribute 10% ($6,000) with a 50% employer match up to 6%, your total annual contribution would be:
Pros:
- Tax-deferred growth
- Employer matching boosts savings
- High contribution limits ($22,500 in 2023, $30,000 for those 50+)
Cons:
- Early withdrawal penalties (10% before 59½)
- Limited investment choices
2. Traditional IRA
An Individual Retirement Account (IRA) allows tax-deductible contributions with taxable withdrawals in retirement.
Contribution Limits (2023):
- $6,500 ($7,500 if 50+)
Tax Benefit Example:
If you contribute $6,000 and are in the 22% tax bracket, you save:
6,000 \times 0.22 = 1,320 in taxes.
3. Roth IRA
Unlike a Traditional IRA, Roth IRA contributions are post-tax, but withdrawals are tax-free.
Income Limits (2023):
- Single filers: $138,000–$153,000 (phase-out)
- Married filing jointly: $218,000–$228,000
Example Growth Calculation:
Investing $6,000 annually for 30 years at 7% return yields:
4. SEP IRA
A Simplified Employee Pension (SEP) IRA is ideal for self-employed individuals and small business owners.
Contribution Limit:
- Up to 25% of compensation or $66,000 (2023), whichever is lower.
5. Solo 401(k)
A 401(k) for self-employed individuals with higher contribution limits than SEP IRAs.
Example Contribution:
If you earn $100,000, you can contribute:
- Employee portion: $22,500
- Employer portion: 25% of compensation = $25,000
- Total: 22,500 + 25,000 = 47,500
6. 403(b) Plans
Similar to a 401(k) but for nonprofit employees, teachers, and healthcare workers.
7. 457(b) Plans
For government and certain nonprofit employees, with no early withdrawal penalty if you leave the employer.
8. Thrift Savings Plan (TSP)
A retirement plan for federal employees with low fees and employer matching.
9. Defined Benefit Plans (Pensions)
Employer-funded plans providing fixed payouts in retirement. Rare in the private sector but still common in government jobs.
Payout Calculation Example:
If your final salary is $80,000 with a 2% multiplier for 20 years of service:
80,000 \times 0.02 \times 20 = 32,000 annually.
10. Annuities
Insurance products providing guaranteed income in retirement.
Types:
- Fixed (stable payments)
- Variable (market-linked)
- Indexed (based on market index performance)
11. Health Savings Account (HSA)
Triple tax-advantaged accounts for medical expenses, usable as a retirement supplement.
Contribution Limits (2023):
- $3,850 (individual)
- $7,750 (family)
12. Taxable Brokerage Accounts
No tax advantages but offer flexibility with no contribution limits or withdrawal penalties.
Comparison of Key Retirement Plans
| Plan Type | Contribution Limit (2023) | Tax Treatment | Employer Match? | Early Withdrawal Penalty |
|---|---|---|---|---|
| 401(k) | $22,500 ($30,000 50+) | Tax-deferred | Yes | 10% before 59½ |
| Roth IRA | $6,500 ($7,500 50+) | Tax-free growth | No | Contributions anytime, earnings penalized |
| SEP IRA | $66,000 or 25% of income | Tax-deferred | No | 10% before 59½ |
| HSA | $3,850 (individual) | Triple tax-free | Sometimes | Non-medical: 20% penalty before 65 |
Which Retirement Plan is Right for You?
- Employed with a 401(k) match? Maximize employer contributions first.
- Self-employed? Consider SEP IRA or Solo 401(k).
- High earner? Use a Backdoor Roth IRA.
- Want tax-free withdrawals? Roth IRA or Roth 401(k).
Common Retirement Planning Mistakes
- Not Starting Early
A 25-year-old investing $300/month at 7% will have:
FV = 300 \times \frac{(1.07^{40} - 1)}{0.07} \approx 719,000
A 35-year-old starting the same would only have:
Ignoring Inflation
Adjust your savings target for inflation. If you need $50,000/year today, in 30 years at 3% inflation:
Overlooking Fees
A 1% fee can reduce a $1M portfolio by $300,000 over 30 years.
Final Thoughts
Choosing the right retirement plan depends on your income, employment status, and financial goals. I recommend diversifying across tax-advantaged accounts to optimize flexibility and tax efficiency. Start early, maximize contributions, and review your strategy annually to stay on track.
By understanding these 101 retirement plans, you can build a secure financial future—one smart decision at a time.
